Baidu’s Tumble on Earnings Trims Advance: China Overnight

Baidu Inc. sank in New York, paring the biggest weekly advance since January in the benchmark gauge of Chinese U.S.-listed stocks, after the Internet company’s earnings fell short of analysts’ estimates.

The Bloomberg China-US Equity Index of the most-traded Chinese equities in the U.S. fell 1.4 percent to 91.17, reducing the weekly gain to 2.4 percent. Baidu, the Beijing-based owner of China’s most-used search engine, slid the most since February. Yanzhou Coal Mining Co. tumbled to a four-year low as its stock was downgraded, while Aluminum Corp. of China Ltd. dropped 4.3 percent after reporting a loss.

Baidu’s net income in the first quarter was 6.8 percent below the median analyst estimate compiled by Bloomberg. Profit rose 8.5 percent, trailing an average increase of 64 percent in the previous five quarters, as advertiser spending dwindled and China’s growth slows. The company, whose stock has slumped 36 percent in the past year, is seeking to buy mobile applications as consumers shift to smartphones from personal computers, Chief Executive Officer Robin Li said yesterday.

“Baidu is spending a lot of money to maintain its market position and search for new growth engines,” Echo He, an analyst at Maxim Group LLC in New York who rates the stock sell, said in a phone interview. “The investment doesn’t necessarily translate into revenue growth. The profit margin will continue to be under pressure.”

ETF Retreats

The iShares FTSE China 25 Index Fund, the largest Chinese exchange-traded fund in the U.S., slipped 0.3 percent to $36.94, paring the ETF’s climb this week to 2.5 percent. The Standard & Poor’s 500 Index dropped 0.2 percent to 1,582.24 after data showed the U.S. economy grew less than forecast in the first quarter and consumer confidence fell to a three-month low. The gauge added 1.7 percent this week.

Baidu sank 7.9 percent to $85.02, the biggest one-day decline since Feb. 5. The company -- which accounted for 82.3 percent of Chinese search-engine queries in the fourth quarter, according to Bloomberg Industries -- wants to extend its dominance of China’s search market to mobile devices and favors acquisitions over building the company, CEO Li said yesterday.

Li said Baidu’s most recent purchase, online video company, was still “burning money.”

American depositary receipts of Yanzhou, China’s fourth-largest coal producer, slid 3.9 percent to $10.72, the lowest level since May 1, 2009. The company, which reported April 25 a 77 percent drop in first-quarter net income, was downgraded to sell from hold by ICBC International Securities Ltd. equity analyst Anna Yu, who reduced the Hong Kong-listed stock’s target price 42 percent to HK$7.04.

BYD Rallies

Aluminum Corp., known as Chalco, slumped to $9.23 in New York. Prices of the lightweight metal in London dropped 8 percent on average in the first quarter amid an industry glut. The Beijing-based company has posted losses in six straight quarters, according to data compiled by Bloomberg.

BYD Co., the Chinese automaker part-owned by Warren Buffett’s Berkshire Hathaway Inc., climbed 4.3 percent to $3.60 in over-the-counter trading in New York after forecasting a 31-fold surge in first-half profit. Shares jumped the most since November 2011 in Hong Kong.

The company, based in Shenzhen, predicted an increase in auto sales and said rising prices for photovoltaic products are helping narrow its solar sector losses.

Trina Solar Ltd. climbed 7.8 percent to a two-month high of $4.84, leading gains on the Bloomberg China-US gauge. Fellow solar manufacturer Yingli Green Energy Holding Co. jumped 5.8 percent to $2.39, the highest level since March 20.

The Shanghai Composite Index of domestic Chinese shares slumped 1 percent to 2177.91 yesterday, the lowest level since Dec. 24, for a weekly slide of 3 percent. The Hang Seng China Enterprises Index in Hong Kong added 0.6 percent to 10,834.08, extending its jump this week to 2.3 percent.

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